On November 18, 2015, the Third Circuit Court of Appeals, which is the federal circuit court covering Pennsylvania, found that a company using a staffing firm to engage temporary employees (“temps”) could be sued as a joint employer under Title VII of the Civil Rights Act of 1964 (“Title VII”). Faush v. Tuesday Morning, Inc., No. 14-1452 (3rd Cir. 2015).

The plaintiff in Faush worked as a temp for a retailer, setting up the store prior to its opening. He said that, while at the site, he and other African-American temps were accused of stealing, were referred to with a racial slur, were subject to other adverse actions, and were terminated from employment. He sued, among other laws, under Title VII.

The staffing service provided the plaintiff and other temps to the retailer pursuant to an agreement between the staffing service and the retailer. Under the agreement, the temps recorded the time they spent at the retailer on time cards. The retailer approved the time cards. Temps who would be absent were to inform the staffing service, not the retailer, of their status. While any temps were at the store, the retailer was responsible for supervising and directing their activities. The retailer provided site-specific safety orientation and personal protective equipment and clothing. The retailer was responsible for determining whether the assigned temps met its requirements for experience, skill, and competency. The parties’ agreement allowed the retailer to inform the staffing service that it was not happy with a temp, and the staffing service would send a replacement. The retailer, however, could not terminate the temp’s employment with the staffing service.

The staffing service set the temps’ pay rate, paid wages, taxes and social security, maintained worker’s compensation insurance and completed I-9 eligibility. The retailer paid the staffing service for each hour worked. The agreement required both parties to comply with all applicable federal, state, and local laws and ordinances.

In deciding that a joint employment relationship existed, the court noted that both Title VII and the PHRA require an individual to have an “employment relationship” with the entity being sued. In deciding whether the temps had an employment relationship with the retailer, the court applied the test set forth by the United States Supreme Court in Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), which addressed a joint employment relationship under the Employee Retirement Income Security Act (“ERISA”). The Darden test looks to whether a party has the right to control the manner and means by which a project is accomplished.

In the Third Circuit, that test focuses on who pays the individuals’ salaries, who hires and fires them, and who has control over their daily employment activities. No one factor is decisive.

Here, the court determined that a jury needed to decide whether a joint employer relationship existed, and summary judgment could not be granted to the retailer. It noted that the retailer bore certain responsibilities regarding the temps’ wages, maintaining primary responsibility for compliance with prevailing wage laws and government-mandated minimum statutory wage laws. The court held that the retailer’s payments to the staffing firm were “functionally indistinguishable from direct employee compensation,” because it paid the staffing firm by the hour rather than by the project.

The court also noted that, although the retailer could not terminate a temp’s employment with the staffing firm, it did have control over whether any particular temp could work at its store. Nothing in the record showed that the staffing firm then would find immediate alternative work for the temp.

The court found that the retailer’s control and supervision of the plaintiff temp’s daily activities favored a joint employer relationship. It noted that the staffing firm did not perform supervisory functions for any of the temps, and only visited the site occasionally. It also noted that the temps were supervised in the same manner as the retailer’s permanent employees.

The court also found it significant that, under the parties’ agreement, the retailer was to comply with applicable laws “concerning employment, including but not limited to: wage and hour, breaks and meal period regulations, the hiring and discharge of employees, Title VII and the FLSA.”

In concluding that a joint-employer relationship could exist here, the court stated: “We are mindful that many aspects of [this] employment arrangement that we have identified in combination as sufficient to survive summary judgment will pertain to a large number of temporary employment arrangements, with attendant potential liability under Title VII for the clients of those temporary employment agencies. We do not anticipate, however, that our holding today, which is limited to the Title VII context, will vastly expand such liability, as entities with over fifteen employees are already subject to Title VII.”

What Does This Mean For You? If you hire temporary employees, you need to be mindful of the fact that those employees may have remedies under Title VII for discrimination. Accordingly, they should be handled no differently than your other employees with respect to your anti-discrimination and anti-harassment policies.

If you have any questions about this or any other employment or labor law issue, please contact Whitney Rahman at (717) 509-7237 or at swr@blakingerthomas.com.